Figures from the World Bank and the United Nations reveal how migratory trends and remittance are affected by the global economic climate. Writer Stephen Timewell.
Only three out of every 100 people on earth is an international migrant, according to the latest United Nations report on population and development, and the surprising aspect is that this figure has not changed since 1990. But while the number of international migrants may have risen by 36 million (as the world’s population has increased) to reach 191 million by 2005, the irony is that in this era of globalisation the growth of the migrant population has slowed down. Also, in contrast to some perceptions that migration is spiralling out of control it is interesting to examine in the current shifting global economic circumstances how increasing numbers of migrants may be returning home to improved domestic circumstances.
Migration patterns have changed but in different ways. The increase in the global number of migrants between 1990 and 2005 was five million lower than between 1975 and 1990. In 1970, in only three countries with populations in excess of 10 million (Australia, Canada and France) did the proportion of international migrants surpass 10%. But by 2000 that number of countries had increased to nine (Australia, Belarus, Canada, Côte d’Ivoire, France, Kazakhstan, Saudi Arabia, Ukraine and the US), with those nine accounting for 40% of the world’s migrant stock.
Today, not surprisingly, the more developed countries are hosting 60% of the world’s migrants with one in three migrants living in Europe and one in four living in North America. In 2005, according to the UN, three quarters of all migrants were hosted by the 28 largest receiving countries. The UN also notes that since 1990, 72 countries registered an absolute decline in their migrant populations as a result in large part to the successful repatriation of some 21 million refugees, particularly to developing countries.
Gulf booms
Reflecting the resolution of some long-standing conflicts, migration patterns have changed as millions of refugees have been able to return home. The UN notes that the global refugee population dropped from 20 million in 1990 to less than 14 million in 2005. Also, demographics and economic necessity are driving change. Europe’s population, for example, would have been declining since 1995 had it not been for migration. Also, one of the largest concentrations of migrants is found in the oil-producing countries in the Middle East, where by 2005 the Gulf states were hosting 13 million migrants, mostly temporary workers.
The oil-rich Gulf states have proved particularly useful to migrants from the Philippines, Pakistan and Bangladesh, especially amid the Gulf’s current economic boom.
According to a World Bank report on remittances in July, the Gulf Co-operation Council (GCC) states have among the highest number of migrants as a share of population in the world, with Qatar at 78%, UAE at 71%, Kuwait at 62%, Bahrain at 41%, Saudi Arabia at 26% and Oman at 24%. Remittances to the Philippines and Pakistan are continuing to grow robustly by between 15% and 20% in the first nine months of 2007, while Bangladesh has experienced a steep increase in the first half of 2008 compared with the previous three years. Remittances from migrants to these areas are said to be helping mitigate the impact of high food and oil prices on the poor in many developing countries.
Remittance trends
The latest World Bank data reveals that remittance flows to developing countries reached $251bn in 2007, up 11% on 2006 and more than double those of 2002. Mexico and the Philippines, which are among the top four remittance recipients in the developing world, reported remittance inflows for 2007 of $25bn and $17.2bn, respectively, with Poland reporting actual inflows of $11bn in 2007, or 2.5% of GDP, twice earlier estimates. This change makes Poland the fifth largest remittance recipient among developing countries with Romania also significantly higher at $9bn in 2007. India and China were the top remittance-recipient countries in 2007, with an estimated $27bn and $25.7bn in remittances, respectively.
So what factors affect migration trends and remittances? And what impact do events such as the credit crunch have? Last month, Mexico’s central bank, Banco de Mexico, announced that remittances have fallen for the first time in a decade. A 6.93% decline was reported for July compared with the same period a year ago. Remittances are Mexico’s second largest source of income after oil, and in 2007 reached $25bn, compared with $13.6bn from January-July 2008.
This fall has been influenced by high inflation in the US, stricter border controls reducing the influx of immigrants into the US, and the currently troubled US economy. After remittances more than doubled between 2002 and 2007, the slowdown in the US economy, especially the construction sector, has affected the employment and incomes of Mexican migrants in the US.
The World Bank says: “The stock of Mexican migrants may not have changed much but the recent (US) enforcement efforts appear to have reduced the number of seasonal migrants and their ability to send remittances, especially through formal channels.”
Why people migrate
Are economic changes the prime cause behind migration moves? Clearly the boom in the GCC states creates job opportunities, but Michelle Mittelstadt, spokesperson for the Washington-based Migration Policy Institute (MPI), is adamant that major moves are not affected by the short-term business climate.
“We believe decisions to migrate are long-term life decisions that have far less to do with the destination countries than the country of origin,” she says.
But much also has to do with skills and levels of government support. The MPI emphasises the role of circular migration programmes by governments to encourage and support mobility patterns and also what governments, such as that of the Philippines, can do to better manage migration.
According to the World Bank’s Neil Ruiz: “More than 8.2 million native Filipinos work or live abroad, equivalent to almost 25% of the total labour force. About 75,000 Filipinos are deployed for overseas employment every month. Filipinos also comprise 30% of all sea-based workers in the world. Remittances from these migrants amounted to about $17bn or 13% of GDP in 2007.”
For example, prior to departure, all Filipino overseas contract workers must undergo the Philippine government’s mandatory deployment process, two key components of which are pre-departure orientation seminars and the issuance of identification cards. Creating an institutional framework helps better manage international migration.
India, China and Mexico were the three largest recipients of remittances in 2007 and, with $77.7bn, they account for nearly one third of remittances received by the developing countries. But migration issues cover more than just remittances, and new markets are opening up in various geographies for various skill sets.
Not only are 300,000 so-called ‘sea turtles’ returning to new opportunities in China (see box) but areas such as the Gulf are now attractive places for senior bank executives from major financial centres, not just for construction workers. With the global financial focus moving east, the Gulf, India and China are taking on new perspectives and luring back many expatriates who have gained valuable experience abroad. Also, immigration structures are changing significantly. In late 2007, Europe created an expanded ‘free-travel area’, known as the Schengen Area, with the addition of nine EU member states to the area.
“This amounts to a ‘big-bang’ expansion of an internally borderless Europe,” says Demetrios Papademetriou, president of MPI. “In this age of mobility, the Schengen expansion demonstrates a real commitment on the part of the EU to creating a union free of internal borders.” Global people flows in all directions are now more of a reality.
THE RETURN OF THE SEA TURTLES
Expanding markets from China to Brazil and the Gulf, especially banks, require talented management and the market for that talent is undoubtedly global. As the credit crunch exposes weaknesses in Western markets, new geographies operating on different economic cycles are attracting new prospects keen to find the next boom and ride a new wave of prosperity.
For institutions everywhere hiring the right talent is critical to their success and in China the group most sought after are ‘sea turtles’ – English-speaking Chinese “returnees” with international banking experience (‘sea turtles’ and ‘returnees’ have the same pronunciation in Mandarin).
As China opened up and foreign bank branches expanded in the 1990s, growing by at least 20 a year and almost doubling assets under management every year, there was huge demand for sea turtles with middle and senior banking experience, but demand for them far outstripped supply. Grace Cheng, country manager for executive search firm Russell Reynolds Associates in Greater China, says: “First, this was because there weren’t significant numbers of overseas Chinese people with banking experience, as most of the early generations of overseas students were government-sponsored scientists and academics.
“Second, China wasn’t seen as attractive enough to lure back those who were doing well on Wall Street or in London. A former New York based Merrill Lynch Chinese banker told us that his friends thought he was crazy when he left his $400,000 pay vice-president position in 1997 to return to China.”
Since China’s entry into the World Trade Organisation in 2002, foreign banks have exploded as has demand for sea turtles. Fourteen foreign banks are now incorporated in China, competing directly with Chinese counterparts. They are seeing incredible growth. In 2003, Standard Chartered had just 300 people in China, it now has more than 3500. Citibank has about 4000 people in China and 14 branches in Shanghai and Beijing alone.
Sea turtles remain the most sought after people, says Ms Cheng, particularly those with experience in advanced Western management and products. One driver is foreign banks’ increased targeting of domestic Chinese enterprises. Another interesting development is that, increasingly, retail banks are hiring sea turtles to be branch managers instead of non-Chinese ex-pats.
As China’s economy continues to grow rapidly, albeit at a slower rate than historical levels, the number of overseas Chinese returning to the country will grow steadily. According to the Chamber of Commerce of Western Returned Scholars Committee, 300,000 sea turtles had returned to China by 2007. The committee expects that number to be 500,000 by 2010. They will be needed by the foreign and Chinese banks as they increase their spread across the country. The question is whether there will be enough of them with the right relevant experience to go round.
Attracting the right talent in China or anywhere comes at a price and in the Hay Group’s latest World Pay Report, Global Management Spending Power, the average salary of a management level employee is examined in order to reach a ranking of the relative spending power in countries across the world (see table). The ranking of the 20 highest management spending power countries uses the US as the base point of measurement or 100 on the index.
The oil-driven Middle East economies top the table with Qatar’s spending power, at 241.7 on the index, almost two and a half times that of US managers. The demand for top talent in the Gulf continues to drive salaries higher.
